An End to Libya’s Eastern Oil Blockade?

On the evening of 6 April Libya’s Justice Minister Salah al-Marghani appeared on national television to announce that an initial agreement had been reached with the federalist group whose protests at eastern oil terminals have cost the country over $8 billion in lost revenues to date. Al-Marghani stated that the settlement: ‘provides for re-opening the oil ports in two stages. The ports at Zueitina and Hariga will be handed over to the state with the signature of this agreement.’ He also said that the two largest occupied ports – Ras Lanuf and Es Sidra – would be reopened ‘after two to four weeks of further negotiations’ with the federalist rebels. Similarly, Ibrahim al-Jathran, the leader of the blockaders, confirmed that the siege had ended at the two ports, announcing: ‘We did this out of goodwill to build trust, have a dialogue and solve all problems between Libyans by peaceful means.’ While al-Jathran also stated that further talks were needed to reach a breakthrough, early reports suggest that Zueitina terminal is already making preparations to load crude as his men watch on, but delays are expected at Hariga due to technical difficulties. In terms of export capacity, both terminals are relatively small fry, with a combined output of about 180,000 barrels per day (bpd) when compared to the recent export capacity of both Ras Lanuf (200,000 bpd) and Es Sidra (360,000 bpd). As such, al-Jathran’s opening of the smaller ports is clearly an initial confidence-building exercise, although it does represent a potentially significant first step toward a resolution of the oil crisis.

Al-Jathran’s willingness to negotiate with the government is indicative of his weakened position. Since the U.S. Navy intervened on 10 March to escort the tanker at the centre of the escalating oil crisis back to a port controlled by the Libyan government it has become increasingly clear that the federalists would struggle to sell their oil illegally. Moreover, al-Jathran’s high-risk attempts to do so highlighted his self-serving factionalist motivations to the majority of the Libyan public, cutting away their support. Meanwhile, al-Jathran’s political wing, the Political Bureau of Cyrenaica (PBC) was beginning to fracture, as the council of eastern elders and prominent businessmen who are backing him urged him to negotiate with the government or they would end their support. Faced with growing public and political isolation, it was clear that al-Jathran had to act to relieve some pressure and re-build his image as a patriot. For their part, the Libyan government have also been in a fix. On 24 March an unrelated protest forced the western el-Feel field to halt production, whilst another ongoing protest at the 330,000 bpd Sharara field shut-in production there. The chronic disruptions have reduced total Libyan production to 150,000 bpd, the lowest level since September 2013, and on 25 March forced the government to seek a $2 billion emergency loan from the central bank to make up for lost revenues.

Faced with such a situation, an agreement was seen a propitious by both sides and represents their desire to be seen be doing everything possible to end the blockade. A one-page document detailing the agreement was subsequently published by the Ministry of Justice detailing the initial settlement. It includes a promise that the protesters will not face trial and that they will be paid their salaries in full. It also states that a committee to oversee loading at the terminals will be established, as will another to investigate past unloading at the ports to address the federalists’ claims of faulty metering. There are also reports that the national headquarters of the Petroleum Facilities Guard will be re-located to Brega, the home of the PBC, as part of the deal. Crucially, however, there is no mention of any agreement in the sharing of oil revenues along federal lines that has been a central demand of the blockaders from the outset. It appears that al-Jathran had been seeking 15 percent share of national oil wealth to be allocated to the Cyrenaica region. This question is of such importance, both to the federalists and the government, that whether or not it can be answered in a manner acceptable to both sides is likely to determine if the larger terminals will open in the near future.

It is very telling that the document released by the Ministry of Justice is signed by al-Jathran, his political deputy, and Sherief el-Waffi, a member of the legislature with authorisation to negotiate on behalf of the government. This fact, and acting Prime Minister Abdullah al-Thinni’s recent silence on the issue, highlight that the government remain keen to keep their distance from the negotiations in case they should fail. Moreover, it also indicates their tacit acknowledgement of the remaining difficulties in resolving the central question of shared oil revenues. Al-Jathran’s recent statements indicate that he sees the recent agreement as simply an opening move, and that he intends to pursue this central issue. For his part, al-Thinni recently stated that any division of oil revenues is a constitutional rather than a political matter. Given these challenges, al-Marghani’s hopes that the main terminals could be open within two-four weeks may be optimistic. Unless al-Jathran’s backers desert him completely, or al-Thinni backs down or is replaced, it is difficult to see how the current issue can be resolved quickly. Given al-Thinni’s position, successful negotiations would likely see increasing emphasis placed on the Constitutional Drafting Committee to write a settlement into the constitution. However, the constitutional drafting process will take months, and once completed, must be ratified by the Libyan public. A week is a long time in the Byzantine world of Libyan politics, but with the western fields still shut-in, it appears there is still some way to go before Libya’s oil production reaches normal output.